1999-12-10 04:00:00 PDT Helsinki, Finland -- European Union leaders gathered here yesterday for a summit conference aimed at reforming and reshaping their organization, but the start of the two- day meeting was distracted by a sudden outbreak of quarrels among member nations.

The conference is a significant one for the 15-nation bloc, with the agenda including the likely creation of a European defense force, agreement on expanding to as many as 28 members and clearing the path for Turkey to join.

The Helsinki gathering also was once envisioned as a way of improving the European Union's relations with Russia by capitalizing on Finland's role as a bridge between Moscow and the West. But that objective has been overtaken by anxiety over the continuing Russian offensive in Chechnya. Other issues that threatened to disrupt the meeting were Britain's outrage at the refusal of France to accept British beef, and a dispute between Germany, France, Britain and Luxembourg over a plan to withhold a 20 percent tax on savings and investments.

Paavo Lipponen, the prime minister of Finland, the current president of the European Union, said the conference should decide to apply financial as well as political pressure on Moscow to end its assault in Chechnya.

The withholding tax proposals, championed by Germany and France, were aimed at clamping down on tax dodgers and tax havens within the 15-nation union. But Britain said that the taxes would trigger an exodus of money and jobs from the huge London-based Eurobond industry. Luxembourg, where many nonresidents invest their savings tax-free, said it was firmly opposed.

The European Commission and Finland presented a compromise that would allow Britain to avoid imposing the tax as long as it notified home countries of their citizens' investments, but the British withheld official comment on the measure.

Prime Minister Tony Blair was not reluctant to comment on learning Wednesday night that France was continuing to refuse British beef in defiance of the European Commission's decision in August to lift its ban. It was imposed three years ago after the outbreak of mad cow disease in British herds. Blair telephoned his French counterpart, Lionel Jospin, to tell him he had delivered a "totally wrong" verdict.

It is uncertain whether the dispute can be moved onto the agenda.

On the issue of increasing membership in the union, Latvia, Lithuania, Slovakia, Bulgaria, Romania, and Malta are slated to join Estonia, Poland, the Czech Republic, Hungary, Slovenia and Cyprus, which have already been accepted for membership.